1. Michael Pahle (PIK) 2nd AHEAD Workshop Berkeley, 2 October 2017
Decarbonizing Electric Grids and Electrifying Transportation: The German case
Michael Pahle (PIK)
2nd AHEAD Workshop
Berkeley, 2 October 2017

2. Energiewende in a nutshell: renewable power policy “success”…
If you know anything about decarbonization in Germany, then it is renewables and Energiewende: here is what it means
Long-term target of 80% in 2050 in the power sector…
And a policy in place that so far delivers very well
So by a large, renewable policy in the power sector a success
Source: BDEW
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

3. …but economy-wide climate policy “failure”
However, unfortunately there are not only stories of success to tell
There are also economy-wide climate targets in place, -80% until 2050 in line with 2°C goal (that was “invented” at PIK)
But there is yet no policy / policy mix in place to achieve it (high ambition needs to be acknowledge)
Where and what are the challenges & options? Let’s go into the details…
Source: UBA
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

4. Most emissions in energy & transport sector
Majority of emissions (~1/3) in energy sector, including power and heating/cooling -> different in California, where sector with highest emissions is transport
But transport is second in Germany, so it is also important for action
In addition, it is the only sector in which emissions have even been rising in last years (trend in wrong direction)
Source: UBA
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

5. Decarbonize power & electrify transport would be halfway to deep decarbonization
technologies well known / mature
effective (efficient?) policy options available
Way forward: decarbonize power, electrify transport
Of course nothing new, but it qualifies the scale of both endeavors and how far it would bring us in terms of deep carbonization
Good news: By and large technologies and policies to decarbonize power (alone) are well known are beyond “proof of concept”
Looking at technologies and policy options…
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

6. Electric vehicles (EV): technology on a good way
(early) pitfalls of emobility
Now a very dynamic market i.a. thanks to Tesla (Tesla Fighter) and China (10% EV quota in 2019, VW sold ~4 mln. cars in 2016)
All big automakers have announced (serious) new EV models & sales strategies, e.g. Volkswagen’s TRANSFORM 2025+
EVs still more expensive and less convenient (range, charging) than ICE, but “break even” seems to be a question of years
Let’s start with technologies, obviously electric vehicles:
In the technology lifecycle there might have been a time when the basic physics of electric engines were a challenge, but we are fairly well in control of Maxwell’s laws by law (in fact, when I was an undergraduate in Physics, I built such an engine)
But by now situation very different:
(points on slides)
So a check on the technology side
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

7. Policy levers for decarbonizing transportation
=Mt (CO2)
Source: Gubman, Pahle, Steinbacher & Burtraw (2016), adopted from CPUC
But certainly not the same on the policy side -> to understand the complexity, let’s look at this figure that identifies three categories of levers
General idea is to use an identity: total emissions (MT) can be expressed as the product of three factors
(describe them)
Focus on specific electrification levers
Total emissions can be expressed as product of three factors
Focus on electrification aspects…
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

8. EVs not necessarily ZEVs, especially in Germany
Induced/avoided emissions
[MtCO2]
incurred emissions (power)
avoided emissions (transport)
Source: Schill
et al. (2014)
Under business-as-usual (BAU ) assumptions, despite ambitious RE deployment, in 2030 emission balance would be negative
Zero emissions only under accelerated RE deployment (RE+)
Start with emission intensity and see to which extent electric vehicle are zero emission
Important to consider incurred emissions in power sector (maybe a no-brainer, but a crucial factor in communication)
(describe slides)
Why is that the case?
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

9. Renewable support (as is) not enough
While RE share increased, emission stagnated because no switch from coal to gas occurred
Coal phase out is essential  price on carbon (EU ETS) and/or command & control similar to nuclear phase out
Source: BMWi (T11)
Closer look at power mix reveals that coal remains in the system, reasons:
Nuclear phase out: RE do not displace coal
Very low allowance price (-> Christian’s talk), no fuel switch
But easier said as done: for political & economic reasons of course (newly built coal plants, stranded assets!), but also because of electrification itself…
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

10. All the more in face of increasing power demand
emobility
power demand [TWh]
heat losses
conv. demand
Source: BMWi Climate Policy
Scenarios (2017)
Demand for electricity decreases until 2030 (under optimistic efficiency assumption), but then increases again
Just about the time where new coal mining decisions are due
Yet another problem that invites sequencing thinking!
These are the results of a recent study that developed scenarios to achieve the long-term climate targets
(describe points)
Sequencing means -> no solution yet, but anticipation of (upcoming) barriers to transportation electrification
What could be suitable policies?
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

11. But temporal variation (VRE) also important
load
renewable generation
“clean”
“dirty”
But this not yet everything: also temporal variation is important (~25% of power consumption, total RE share: 33%)
(show charging layer)
Implication: charging behavior can make a big difference, especially in terms of “daily routines”
Likely very considerable social benefits from “right” charging, requires proper price incentives…
load
renewable generation
Source: BDEW
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

12. Price incentives essential, but suppressed 2-fold
1) No real-time pricing (RTP)
Typical EV driver (household) is flat priced  no response
Households / drivers very reluctant to adopt RTP
2) Wholesale price only ~20% of retail price
Very high absolute price level, mostly fixed components
Under typical short-term price elasticity (-1%), little response even with RTP
29,23 ct/kWh*
RE support levy
grid fees
Straight forward slide
wholesale price
*average household price
Source: BDEW
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

13. Impacts of increasing EVs & cleaner power
1) Increasing number of EVs
[-] expansion of (distribution) grid due to charging increases grid fees
[+] using EV batteries as flexibility option (V2G, prosumage) might reduce grid fees
Use of batteries in both directions?
2) Power sector decarbonization
price effect depending on policy: [-] support scheme, [+] carbon price
[+] additional incentives from policy induced negative prices, but currently a concern (§51 EEG)
Implication for power decarbonization policy?
29,23 ct/kWh*
RE support - + - +
grid fees
Straight forward too
wholesale price
*average household price
Source: BDEW
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

14. How to bring – and “price” – it all together?
activate
demand
varying hourly
intensity
flexibility /
VGI & V2G
price effects of
decarb. policies
increasing
power demand
Now the big question is how to bring this all together?
Throw it all in the big policy pot and stir it well…
Smart RPS?
integrated
pricing?
policy
pot
dynamize fixed
components?
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

15. Contact
Dr. Michael Pahle Head of working group "Energy Strategies Europe & Germany" Potsdam Institute for Climate Impact Research (PIK) Research Domain III (Sustainable Solutions) PO Box Potsdam Germany Tel: Fax:
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

16. backup
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

17. High temporal variation of emission intensity
15 May
2016 GW PV
wind on.
wind off.
hydro
12:00
24:00
biomass
17 Sep
2017 GW
nuclear
12:00
24:00
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

18. Power Sector: A very different picture
Considerable increase of renewables in power consumption over last 15 years
From 6% in 2000 up to 33% in 2015, 27 percentage points
Major driver: RE feed-in tariff (EEG) implemented in 2000
Source: BMWi (T20)
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany

19. Costs of renewable support
Source: BDEW (2016)
Annual costs of support has risen to more than 23 bil. € (>60 €/MWh)
~50% for solar pv (~20% of all RE power production)  surge in
Expected decline after 2025 when old installations stop receiving subsidies
M. Pahle, Decarbonizing Electric Grids and Electrifying Transportation:Germany